Why can’t I pay my income tax debt in monthly installments to the Internal Revenue Service?
While in Chapter 13 bankruptcy case, the Internal Revenue Service (IRS) will require any debt owed to be paid in your Chapter 13 plan. This is to ensure the IRS debt will be paid in timely manner over the course of your Chapter 13 plan.
If you continue to owe every year that you remain in Chapter 13 bankruptcy then annual plan modifications may be required and you can expect a continual increase in your monthly plan payment to the Chapter 13 trustee.
If you have IRS debt provided for in your Chapter 13 plan and your post petition tax years reflect refund then the IRS will offset against the amount being paid in your bankruptcy plan. Once tax refund offsets have paid the balance owed to the IRS in full then the IRS will file amended proof of claim to list a $0 balance owed. At this time, then a plan modification may be filed to make the appropriate changes to the IRS debt provided for your bankruptcy plan. This will reduce the amount of priority debt listed in your plan base. Consult with your attorney to find out how removal of IRS debt will affect your plan base, plan payment and/or plan term. Changes allowed on plan modification will vary based on specific clients plan.
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